The Lost Partnership: How and Why Startups, Corporations Can Work Together

Image: SalFalko/Flickr

In an acquisition-happy environment, many in the tech world believe that corporations and startups can’t form mutually beneficial relationships without one ultimately buying out the other. In fact, startups that are adamant on keeping their identity and building their own reputation are often reluctant to partner with larger, more established companies. But startups shouldn’t feel like they are “selling out” by teaming up with bigger companies, and corporations shouldn’t feel wary of startup culture not jiving with company ethos. There is a junction there, and I’d like to talk about it.

Let’s examine a small startup, full of risk-taking spirit and innovative ideas. They are good at what they do, unafraid of bold decision-making and excited at the prospect of changing an industry by creating something entirely new. Often times, the only roadblock holding them back from success is a lack of capital, which can interfere with their goals and potential for future success.

Since a corporation typically has plenty of capital, it seems clear why a startup like the above would benefit from a relationship with a larger company. Such connections provide access to needed resources, as well as branding and PR expertise that does not come at an additional cost. At the same time, visibility and credibility are increased, which usually takes years to build effectively.

Without the fear of acquisition (if that is indeed a fear), it makes sense from the startup’s perspective to partner with a more established company. But how can a corporation benefit from a partnership with a budding startup? What can an already established corporation, one with the existing capabilities and resources to develop their technology needs, gain from opening the communication line and forming a partnership with a startup?

If you have ever worked in a large company, you know that decisions take time. Between conference calls, rounds of approvals, and the view points and weigh-in different people with different goals and agendas.

Queue the small and nimble startup. The corporation can nab up this group of risk-taking innovators and let them hit the ground running with the project. The startup doesn’t have to go through extensive protocol to get the ball rolling. They get moving quickly, take risks, experiment, and get the job done for the corporation. The alpha product made by the startups does not risk the corporation’s financial security either. They haven’t had to implement a new department, acquire new resources, or onboard any new employees.

A startup-corporate partnership gives freedom to both parties. Corporations have the freedom to quickly pursue their market opportunities. Startups have the freedom to execute on innovative ideas with endless resources.

And it is more than just the product itself. Larger companies benefit culturally from bringing a startup in the mix. Fresh ideas are stirred up, perspectives are shifted, and innovation abounds.

The fact is, technology is relatively inexpensive and it is being rapidly developed by startups. While corporations offer large distribution channels, they are often looking for innovative technologies to enhance their business quickly, without adding to their overhead. As partnerships between big companies and startups bud, the opportunity for acquisition can make sense for both sides. Combining the deft and nimbleness of startups with the resources and distribution channels of large companies can lead to profitable partnerships. And that is the truly incredible aspect of the changing business model.